NWBI US Equity☆

ITEM 1A.RISK FACTORS

In addition to factors discussed in the description of our business and elsewhere in this report, as well as other filings we make with the SEC, the following are factors that could adversely affect our future results of operations and financial condition.

Risks Related to our Lending Activities

Our commercial loan portfolio is increasing and the inherently higher risk of loss may lead to additional provisions for credit losses or charge-offs, which would negatively impact earnings and capital.

Commercial loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the business and the income stream of the borrowers. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Also, many of our commercial borrowers have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Commercial business loans expose us to additional risk since they typically are dependent on the borrower’s ability to make repayments from the cash flows of the business and are secured by non-real estate collateral that may depreciate over time. Further, our commercial business loans may be secured by collateral other than real estate, such as inventory and accounts receivable, the value of which may be more difficult to appraise, control or collect and may be more susceptible to fluctuation in value at the time of default. In addition, if we foreclose on these loans, our holding period for the collateral may be longer than for a single or multi-family residential property if there are fewer potential purchasers of the collateral.

The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.

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The FDIC and the other federal bank regulatory agencies have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors, (i) total reported loans for construction, land acquisition and development, and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm residential properties, loans for construction, land acquisition and development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. Based on these factors, we have a concentration in multi-family and commercial real estate lending, as such loans represent 356% of total bank capital as of December 31, 2023. The particular focus of the guidance is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us or that may result in a curtailment of our multi-family and commercial real estate lending that would adversely affect our loan originations and profitability.

If the allowance for credit losses is not sufficient to cover actual credit losses, our earnings could decrease.

Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant credit losses, which may have a material adverse effect on operating results. We make various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. If our assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease net income.

Our emphasis on originating commercial real estate and commercial loans is one of the more significant factors in evaluating the allowance for credit losses. As we continue to increase the amount of such loans, increased provisions for credit losses may be necessary, which would decrease our earnings. In addition, any future credit deterioration could require us to increase our allowance for credit losses in the future.

Bank regulators periodically review our allowance for credit losses and may require an increase to the provision for credit losses or further loan charge-offs. Any increase in our allowance for credit losses or loan charge-offs resulting from these reviews may have a material adverse effect on our results of operations or financial condition.

The foreclosure process may adversely impact our recoveries on non-performing loans.

The judicial foreclosure process is protracted, which delays our ability to resolve non-performing loans through the sale of the underlying collateral. The longer timelines have been the result of the economic crisis, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure. These reasons and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures for residential mortgage lenders. This may result in a material adverse effect on collateral values and our ability to minimize its losses.

Risks Related to Laws and Regulations

Changes in laws and regulations and the cost of compliance with new laws and regulations may adversely affect our operations and our income.

The Company and Northwest Bank are subject to extensive regulation, supervision and examination by the Federal Reserve Board, the Department of Banking and the FDIC. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on Northwest Bank’s operations, reclassify assets, determine the adequacy of Northwest Bank’s allowance for credit losses and determine the level of deposit insurance premiums assessed. The laws and regulations applicable to us are subject to frequent change and interpretations. Any change in these regulations and oversight, whether in the form of regulatory policy, new regulations or legislation or additional deposit insurance premiums could have a material impact on our operations.

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The potential exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards. Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements. Bank regulatory agencies, such as the Federal Reserve Board, the Department of Banking, the CFPB and the FDIC, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge and our ongoing operations, costs and profitability.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions or affect our ability to pursue further acquisition opportunities. During the last year, several banking institutions have received large fines for non-compliance with these laws and regulations. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, these policies and procedures may not be effective in preventing violations of these laws and regulations.

We are subject to the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material penalties.

The Community Reinvestment Act (“CRA”), the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and restrictions on expansion. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations.

We could become subject to more stringent capital requirements, which could adversely impact our return on equity, require us to raise additional capital, or constrain us from paying dividends or repurchasing shares.

Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define “capital” for calculating these ratios. The minimum capital requirements are: (i) a common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. Unrealized gains and losses on certain “available-for-sale” securities holdings are to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out was exercised. The Bank exercised this one-time opt-out option. The regulations also establish a “capital conservation buffer” of 2.5% and the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7%, (ii) a Tier 1 to risk-based assets capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.

At December 31, 2023, Northwest Bank has met all of these requirements, including the full 2.5% capital conservation buffer.

The application of more stringent capital requirements could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements. Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital and/or additional capital conservation buffers could result in management modifying its business strategy, and could limit our ability to make distributions, including paying out dividends or buying back shares. Specifically, Northwest Bank’s ability to pay dividends to stockholders will be limited if it does not have the capital conservation buffer required by the capital rules. Furthermore, the imposition of liquidity requirements in connection with the implementation of Basel III could result in our having to increase our holdings of liquid assets, lengthen the term of our funding, and/or restructure our business model.

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The Federal Reserve Board may require us to commit capital resources to support Northwest Bank.

Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve Board may require a holding company to make capital injections into a troubled subsidiary bank and may charge the holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank. A capital injection may be required at times when the holding company may not have sufficient resources and therefore may be required to borrow the funds or raise capital. Any borrowing or capital raise could occur at a time that is more difficult and expensive and could have an adverse effect on our business, financial condition, and results of operations.

Future legislative or regulatory actions responding to perceived financial and market problems could impair our ability to foreclose on collateral.

There have been proposals made by members of Congress and others that would reduce the amount distressed borrowers are otherwise contractually obligated to pay under their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral. Were proposals such as these, or other proposals limiting our rights as a creditor, to be implemented, we could experience increased credit losses or increased expense in pursuing our remedies as a creditor.

Legal and regulatory proceedings and related matters could adversely affect us or the financial services industry in general.

We, and other participants in the financial services industry upon whom we rely to operate, have been and may in the future become involved in legal and regulatory proceedings. Most of the proceedings we consider to be in the normal course of our business are typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and other participants in the financial services industry or we may not prevail in any proceeding or litigation. There could be substantial cost and management diversion in such litigation and proceedings, and any adverse determination could have a materially adverse effect on our business, brand or image, or our financial condition and results of our operations.

Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve Board to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve Board have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

Risks Related to Market Interest Rates

The reversal of the historically low interest rate environment has and may continue to adversely affect our net interest income and profitability.

The Federal Reserve Board decreased benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic. Beginning in 2022, the Federal Reserve Board reversed its policy of near zero interest rates given its concerns over inflation. Market interest rates have risen significantly in response to the Federal Reserve Board’s rate increases. As discussed below, the increase in market interest rates has had, and may continue to have, an adverse effect on our net interest income and profitability.

Changes in interest rates could adversely affect our results of operations and financial condition.

While we strive to control the impact of changes in interest rates on our net income, our results of operations and financial condition could be significantly affected by changes in interest rates. Our results of operations depend substantially on our net interest income, which is the difference between the interest income we earn on our interest-earning assets, such as loans and investment securities, and the interest expense we pay on our interest-bearing liabilities, such as deposits, borrowings and trust preferred securities. Because it is difficult to perfectly match the maturities and cash flows from our financial assets and liabilities our net income could be adversely impacted by changes in the level of interest rates or the slope of the Treasury yield curve.

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Changes in interest rates may also affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and investment securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans. Also, increases in interest rates may extend the life of fixed rate assets, which would restrict our ability to reinvest in higher yielding alternatives, and may result in customers withdrawing certificates of deposit early so long as the early withdrawal penalty is less than the interest they could receive as a result of the higher interest rates.

Changes in interest rates also affect the current fair value of our interest-earning investment securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2023, the fair value of our investment and mortgage-backed securities portfolio totaled $1.743 billion. Net unrealized losses on these securities totaled $312.0 million at December 31, 2023. During the year ended December 31, 2023, we incurred other comprehensive gains of $7.9 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio.

The current level of, or any increases in market interest rates may reduce our mortgage banking income. We generate revenues primarily from gains on the sale of mortgage loans to investors, and from the amortization of deferred mortgage servicing rights. We recognized noninterest income of $2.4 million on mortgage banking activities during the year ended December 31, 2023. We also earn interest on loans held for sale while awaiting delivery to our investors. In a rising or higher interest rate environment, our mortgage loan originations may decrease, resulting in fewer loans that are available for sale. This would result in a decrease in interest income and a decrease in revenues from loan sales. In addition, our results of operations are affected by the amount of noninterest expense associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment, data processing and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.

Hedging against interest rate exposure may adversely affect our earnings.

On occasion we have employed various financial methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities. We also engage in hedging strategies with respect to arrangements with our customers. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions. Hedging strategies can be imperfect and may fail to protect us from loss. Moreover, hedging activities could result in costs if the hedge proves to be ineffective. Additionally, hedging activities could fail to protect us or adversely affect us because, among other things:

•available interest rate hedging may not correlate to the risk for which protection is sought;

•the duration of the hedge may not match the duration of the related asset or liability;

•the counterparty in the hedging transaction may default on its obligation to pay;

•the credit quality of the counterparty may degrade to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;

•the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value; and/or

•downward adjustments, or “mark-to-market” losses, would reduce our stockholders’ equity.

Risk Related to the COVID-19 Pandemic

The economic impact of the COVID-19 outbreak could continue to affect our financial condition and results of operations.

Global health concerns relating to the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have continued to affect the macroeconomic environment, both nationally and in the Company’s existing geographic footprint.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be fully controlled and abated. The COVID-19 pandemic and the related adverse local and national economic consequences could result in a material, adverse effect on our business, financial condition, liquidity, and results of operations.

Risks Related to Economic Conditions

A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of non-performing loans, which could adversely affect our operations, financial condition and earnings.

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Our performance is significantly impacted by the general economic conditions in our primary markets in Pennsylvania, New York, Ohio, and Indiana. At December 31, 2023, 38% of our loan portfolio was secured by properties located in Pennsylvania, and 12% of our loan portfolio was secured by properties located in New York, with a large portion of the rest of our loans secured by real estate located in Ohio and Indiana. Local economic conditions have a significant impact on the ability of our borrowers to repay loans and the value of the collateral securing loans.

A deterioration in economic conditions could result in the following consequences, any of which could have a material adverse affect on our business, financial condition, liquidity and results of operations:

•demand for our products and services may decline;

•loan delinquencies, problem assets and foreclosures may increase;

•we may increase our allowance for credit losses;

•collateral for loans, especially real estate, may decline in value, in turn reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and

•the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

In addition, deflationary pressures could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Inflation can have an adverse impact on our business and on our customers.

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. Inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. Sustained higher interest rates by the Federal Reserve Board to tame persistent inflationary price pressures could also push down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.

Beginning in 2022, in response to a pronounced rise in inflation, the Federal Reserve Board reversed its policy of “near zero” interest rates and has materially increased the target Fed Funds rate. As discussed under “Risks Related to Market Interest Rates - Changes in interest rates could adversely affect our results of operations and financial condition,” as inflation increases and market interest rates rise the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.

We may be negatively impacted by customer and depositor reaction to unrelated bank failures.

On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations. On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of Financial Protection and Innovation. On March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services, and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the California Department of Financial Protection and Innovation. These banks had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.

These bank failures have led to an increased customer and regulatory focus on funding and liquidity at financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. If we are unable to meet the increased expectations of our customers and regulatory agencies, it may have a material adverse effect on our financial condition and results of operations.

A lack of liquidity could adversely affect the Company’s financial condition and results of operations.

Liquidity is essential to the Company’s business. The Company relies on its ability to generate deposits and effectively manage the repayment of its liabilities to ensure that there is adequate liquidity to fund operations. An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity. The Company’s most important source of funds is its deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk adjusted return, which are strongly influenced by such external factors as the direction of interest rates, local and national economic conditions and the availability and attractiveness of alternative investments.

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Further, the demand for deposits may be reduced due to a variety of factors such as negative trends in the banking sector, the level of and/or composition of our uninsured deposits, demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the Federal Reserve or regulatory actions that decrease customer access to particular products. If customers move money out of bank deposits and into other investments such as money market funds, the Company would lose a relatively low-cost source of funds, which would increase its funding costs and reduce net interest income. Any changes made to the rates offered on deposits to remain competitive with other financial institutions may also adversely affect profitability and liquidity. Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities and/or loans, brokered deposits, borrowings from the FHLB and/or FRB discount window, and unsecured borrowings. The Company also may borrow funds from third-party lenders, such as other financial institutions. The Company’s access to funding sources in amounts adequate to finance or capitalize its activities, or on terms that are acceptable, could be impaired by factors that affect the Company directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry, a decrease in the level of the Company’s business activity as a result of a downturn in markets or by one or more adverse regulatory actions against the Company or the financial sector in general. Any decline in available funding could adversely impact the Company’s ability to originate loans, invest in securities, meet expenses, or to fulfill obligations such as meeting deposit withdrawal demands, any of which could have a material adverse impact on its liquidity, business, financial condition and results of operations.

Risks Related to our Business Strategy

Acquisitions may disrupt our business and dilute stockholder value.

We regularly evaluate merger and acquisition opportunities with other financial institutions and financial services companies. As a result, negotiations may take place and future mergers or acquisitions involving cash, debt, or equity securities may occur at any time. We would seek acquisition partners that offer us either significant market presence or the potential to expand our market footprint and improve profitability through economies of scale or expanded services.

Acquiring other banks, businesses, or branches may have an adverse effect on our financial results and may involve various other risks commonly associated with acquisitions, including, among other things:

•difficulty in estimating the value of the target company;

•payment of a premium over book and market values that may dilute our tangible book value and earnings per share in the short and long term;

•potential exposure to unknown or contingent liabilities of the target company;

•exposure to potential asset quality problems of the target company;

•potential volatility in reported income associated with goodwill impairment losses;

•difficulty and expense of integrating the operations and personnel of the target company;

•inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits of the acquisition;

•potential disruption to our business;

•potential diversion of our management’s time and attention;

•the possible loss of key employees and customers of the target company; and

•potential changes in banking or tax laws or regulations that may affect the target company.

Loans that were acquired as part of our acquisitions of other depository institutions were not underwritten or originated in accordance with our credit standards, including environmental matters, and we did not have long-standing relationships with many of these borrowers at the time of acquisition. The acquired loans are re-risked at that date of acquisition based on our credit standards, which can temporarily increase loans classified as special mention and substandard for a period of time until these loans are integrated and conform to our credit standards. Although we reviewed the loan portfolios of each institution acquired as part of the diligence process, and believe that we have established reasonable credit marks with regard to all loans acquired, we may incur losses in excess of the credit marks with regard to these acquired loans, and any such losses, if they occur, may have a material adverse effect on our business, financial condition, and results of operations.

Acquisitions may not enhance our cash flows, business, financial condition, results of operations or prospects as expected and such acquisitions may have an adverse effect on our results of operations, particularly during periods in which the acquisitions are being integrated into our operations.

Our continued pace of growth may require us to raise additional capital during unfavorable market conditions.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate that we will have sufficient capital resources to satisfy our capital requirements for the foreseeable future. We may at some

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point, however, need to raise additional capital to support our continued growth. If we raise capital through the issuance of additional shares of our common stock or other securities, it would dilute the ownership interests of existing stockholders and may dilute the per share book value of our common stock. New investors may also have rights, preferences and privileges senior to our current stockholders, which may adversely impact our current stockholders. Also, the need to raise additional capital may force our management to spend more time in managerial and financing-related activities than in operational activities.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control, and on our financial performance. Accordingly, we may not be able to raise additional capital, if needed, with favorable terms. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

New lines of business or new products and services may subject us to additional risks.

From time to time, we may implement new lines of business or offer new products and services within existing lines of business. In addition, we will continue to make investments in research, development, and marketing for new products and services. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services we may invest significant time and resources. Initial timetables for the development and introduction of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. Furthermore, if customers do not perceive our new offerings as providing significant value, they may fail to accept our new products and services. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, the burden on management and our information technology of introducing any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations.

Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

Our business strategy includes growth in assets, deposits and the scale of our operations. Achieving our growth targets will require us to attract customers that currently bank at other financial institutions in our market, thereby increasing our share of the market. Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market area and our ability to manage our growth. In order to successfully manage our growth, the Company may need to adopt and effectively implement new or revise existing policies, procedures, and controls, as well as hire additional employees or pay higher salaries to retain existing employees, to maintain credit quality, control costs and oversee the Company’s operations. Growth opportunities may not be available or we may not be able to manage our growth successfully. If we do not manage our growth effectively, our financial condition and operating results could be negatively affected.

Uncertainties associated with increased loan originations may result in errors in our judgment of collectability, which may lead to additional provisions for credit losses or charge-offs, which would negatively affect our operations.

Increasing loan originations would likely require us to lend to borrowers with which we have limited experience. Accordingly, we would not have a significant payment history pattern with which to judge future collectability. Further, newly originated loans have not been subjected to unfavorable economic conditions. As a result, it may be difficult to predict the future performance of newly originated loans. These loans may have delinquency or charge-off levels above our recent historical experience, which could adversely affect our future performance.

Risk Related to Competitive Matters

Strong competition may limit growth and profitability.

Competition in the banking and financial services industry is intense. We compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, fintech companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than we have and may offer certain services that we do not or cannot provide. In addition, some have competitive advantages such as the credit union exemption from paying federal income tax. Competitive factors driven by consumer sentiment or otherwise can also reduce our ability to generate fee income, such as through overdraft fees. Our profitability depends upon our ability to successfully compete in our market areas.

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Risks Related to Operational Matters

Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings.

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches, but such events may still occur or may not be adequately addressed if they do occur. In addition, any compromise of our systems could deter customers from using our products and services. Although we rely on security systems to provide security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.

Our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Ensuring that our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase our costs. Despite the defensive measures we take to manage our internal technological and operational infrastructure, threats may originate externally from third parties such as foreign governments, organized crime and other hackers, and outsource or infrastructure-support providers and application developers, or may originate internally from within our organization. Furthermore, we may not be able to ensure that all of our clients, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. Our heavy reliance on information technology systems exposes us to operational risks, which include the risk of malfeasance by employees or persons outside of our organization, errors relating to transaction processing and technology, systems failures or interruptions, failures to properly implement systems upgrades, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery.

In addition, we outsource a significant amount of our data processing to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.

Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.

Our risk management framework is designed to minimize risk and loss to us. We seek to identify, measure, monitor, report and control our exposure to risk, including strategic, market, liquidity, credit, interest rate, compliance and operational risks. While we use a broad and diversified set of risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Recent economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased our level of risk. Accordingly, we could suffer losses as a result of our failure to properly anticipate and manage these risks.

Our board of directors relies to a large degree on management and outside consultants in overseeing cybersecurity risk management.

The Board of the Company has an Innovation and Technology Sub-Committee, consisting of wholly independent directors chartered, among other items, with a focus on cybersecurity risk. Additionally, the Company’s Board has a designated Risk Management Sub-Committee with the responsibility of monitoring enterprise level risks, including those related to cybersecurity. Furthermore, management of the Company has both an Enterprise Risk Management Committee and an Information Technology Steering Committee (ITSC), both of which are comprised of the most senior members of management, including the Chief Executive Officer, Chief Information Officer, and Chief Operating Officer. The ITSC meets monthly, or more frequently if needed, and the ERMC meets quarterly, or more frequently if needed. Material items related to cybersecurity are reported to the Innovation and Technology and Risk Management Sub-Committees. The Company also engages outside consultants to support its cybersecurity efforts. The directors of the Company do not have significant experience in cybersecurity risk management in other business entities comparable to the Company and rely on members of management, including, but not limited to, the Chief Information Security Officer, Chief Information Security Officer, Chief Technology Officer and Chief Data Officer, for cybersecurity guidance.

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Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.

Our loans to businesses and individuals and our deposit relationships and related transactions are subject to exposure to the risk of loss due to fraud and other financial crimes. Nationally, reported incidents of fraud and other financial crimes have increased. We have also experienced losses due to apparent fraud and other financial crimes. While we have policies and procedures designed to prevent such losses, losses may still occur.

We could be adversely affected by the soundness of other financial institutions and other third parties we rely on.

Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks and other institutional customers. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when our collateral cannot be foreclosed upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due. Furthermore, successful operation of our debit card and cash management solutions business depends on the soundness of third party processors, clearing agents and others that we rely on to conduct our merchant business. Any losses resulting from such third parties could adversely affect our business, financial condition and results of operations.

Risks Related to Environmental and Other Global Matters

We are subject to environmental liability risk associated with lending activities.

A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or regulations or more stringent interpretations or enforcement policies with respect to existing laws and regulations may increase our exposure to environmental liability, and heightened pressure from investors and other stakeholders may require to incur additional expenses with respect to environmental matters. Although we have policies and procedures to perform an environmental review before initiating any foreclosure action on nonresidential real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. We and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions, operating process changes and other issues. The impact on our customers will likely vary depending on their specific attributes, including reliance on role in carbon intensive activities, among the impacts to us could be a drop in demand for our products and services, particularly in certain sectors. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of asset securing loans. Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

Our business, financial condition, and results of operations could be adversely affected by natural disasters, health epidemics, and other catastrophic events.

We could be adversely affected if key personnel or a significant number of employees were to become unavailable due to a pandemic, natural disaster, war, act of terrorism, accident, or other reason. Any of these events could result in the temporary reduction of operations, employees, and customers, which could limit our ability to provide services. Additionally, many of our borrowers may suffer property damage, experience interruption of their businesses or lose their jobs after such events. Those borrowers might not be able to repay their loans, and the collateral for such loans may decline significantly in value.

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Risks Related to Accounting Matters

If our intangible assets, including goodwill, are either partially or fully impaired in the future, it would decrease earnings.

We are required to test our goodwill and other identifiable intangible assets for impairment on an annual basis and more regularly if indicators of impairment exist. The impairment testing process considers a variety of factors, including the current market price of our common stock, the estimated net present value of our assets and liabilities and information concerning the terminal valuation of similar insured depository institutions. Future impairment testing may result in a partial or full impairment of the value of our goodwill or other identifiable intangible assets, or both. If an impairment determination is made in a future reporting period, our earnings and the book value of these intangible assets will be reduced by the amount of the impairment. However, the recording of such an impairment loss would have no impact on the tangible book value of our shares of common stock or our regulatory capital levels.

Changes in management’s estimates and assumptions may have a material impact on our Consolidated Financial Statements and our financial condition or operating results.

In preparing this annual report as well as periodic reports we are required to file under the Securities Exchange Act of 1934, including our Consolidated Financial Statements, our management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for credit losses.

Risks Related to Investment Activities

We could record future losses on our investment securities portfolio.

A number of factors or combinations of factors could require us to conclude in one or more future reporting periods that an unrealized loss that exists with respect to these and other securities constitutes a credit related impairment, which could result in material losses to us. These factors include, but are not limited to, failure by the issuer to make scheduled interest payments, the issuer of the securities and their creditworthiness, any changes to the rating of the security and any adverse conditions specifically related to the security that would render us unable to forecast a full recovery in value. In addition, the fair values of securities could decline if the overall economy and the financial condition of some of the issuers deteriorates and there remains limited liquidity for these securities. During the year ended December 31, 2023, we incurred other comprehensive gains of $7.9 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Balance Sheet Analysis-Securities” for a discussion of our securities portfolio and the unrealized losses related to the portfolio, as well as the “Marketable Securities” and “Disclosures about Fair Value of Financial Instruments” footnotes to the audited financial statements.

Our exposure to municipalities may lead to operating losses.

Our municipal bond portfolio may be impacted by the effects of economic stress on state and local governments. At December 31, 2023, we had $85.8 million invested in debt obligations of states, municipalities and political subdivisions (collectively referred to as our municipal bond portfolio). We also had $194.3 million of loans outstanding to municipalities and political subdivisions. State and local governments may experience financial stress due to: (i) declining revenues; (ii) large unfunded liabilities to government workers; and (iii) entrenched cost structures. Additionally, the debt-to-gross domestic product ratios for the majority of states have been deteriorating due to, among other factors, declines in federal monetary assistance. These challenges have led to speculation about the potential for a significant deterioration in the municipal bond market, which could materially affect our results of operations, financial condition and liquidity. We may not be able to mitigate the exposure in our municipal portfolio if state and local governments are unable to fulfill their obligations. The risk of widespread issuer defaults may also increase if there are changes in legislation that permit states, or additional municipalities and political subdivisions, to file for bankruptcy protection or if there are judicial interpretations that, in a bankruptcy or other proceeding, lessen the value of any structural protections.

The financial services sector represents a significant concentration within our investment portfolio.

Within our investment portfolio, we have a significant amount of corporate debt and mortgage-backed securities issued by companies in the financial services sector. Given current market conditions, this sector has an enhanced level of credit risk.

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Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings and financial condition.

A possible downgrade of the sovereign credit ratings of the U.S. government and a decline in the perceived creditworthiness of U.S. government-related obligations could impact the value of our investments, and the availability and pricing of funding transactions collateralized by those instruments. We cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizations will affect economic conditions. Such ratings actions could result in a significant adverse impact on us. Among other things, a downgrade in the U.S. government’s credit rating could adversely impact the value of our securities portfolio and may trigger requirements that we post additional collateral for trades relative to these securities. A downgrade of the sovereign credit ratings of the U.S. government or the credit ratings of related institutions, agencies or instruments would significantly exacerbate the other risks to which we are subject and any related adverse effects on the business, financial condition and results of operations.

Risks Related to Our Debit and Credit Activities

Changes in card network rules or standards could adversely affect our business.

In order to provide our debit card and cash management solutions, we are members of the Visa network. As such, we are subject to card network rules that could subject us to a variety of fines or penalties that may be assessed on us. The termination of our membership or any changes in card network rules or standards, including interpretation and implementation of existing rules or standards, could increase the cost of operating our merchant services business or limit our ability to provide debit card and cash management solutions to or through our customers, and could have a material adverse effect on our business, financial condition and results of operations.

Changes in card network fees could impact our operations.

From time to time, the card networks increase the fees (known as interchange fees) that they charge to acquirers and that we charge to our merchants. It is possible that competitive pressures will result in us absorbing a portion of such increases in the future, which would increase our costs, reduce our profit margin and adversely affect our business and financial condition. In addition, the card networks require certain capital requirements. An increase in the required capital level would further limit our use of capital for other purposes.

Our business could suffer if there is a decline in the use of debit cards as a payment mechanism or if there are adverse developments with respect to the financial services industry in general.

As the financial services industry evolves, consumers may find debit financial services to be less attractive than traditional or other financial services. Consumers might not use debit card financial services for any number of reasons, including the general perception of our industry. If consumers do not continue or increase their usage of debit cards, including making changes in the way debit cards are loaded, our operating revenues and debit card deposits may remain at current levels or decline. Any projected growth for the industry may not occur or may occur more slowly than estimated. If consumer acceptance of debit financial services does not continue to develop or develops more slowly than expected or if there is a shift in the mix of payment forms, such as cash, credit cards, and debit cards, away from our products and services, it could have a material adverse effect on our financial position and results of operations.

Other Risks Related to Our Business

The corporate governance provisions in our articles of incorporation and bylaws, and the corporate governance provisions under Maryland law, may prevent or impede the holders of our common stock from obtaining representation on our Board of Directors and may impede takeovers of the Company that our board might conclude are not in the best interest of us or our stockholders.

Provisions in our articles of incorporation and bylaws may prevent or impede holders of our common stock from obtaining representation on our Board of Directors and may make takeovers of Northwest Bancshares, Inc. more difficult. As a result, our stockholders may not have the opportunity to participate in such a transaction, which could provide a premium over the prevailing price of our common stock. The provisions that may discourage takeover attempts or make them more difficult include that our Board of Directors is divided into three staggered classes. A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur. Our articles of incorporation include a provision that no person will be entitled to vote any shares of our common stock in excess of 10% of our outstanding shares of common stock. This limitation does not apply to the purchase of shares by a tax-qualified employee stock benefit plan established by us. In addition, our articles of incorporation and bylaws restrict who may call special meetings of stockholders and how directors may

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be removed from office. Additionally, in certain instances, the Maryland General Corporation Law requires a supermajority vote of our stockholders to approve a merger or other business combination with a large stockholder, if the proposed transaction is not approved by a majority of our directors.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our current market and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and operating results may be adversely affected.

If our government banking deposits were lost within a short period of time, this could negatively impact our liquidity and earnings.

As of December 31, 2023, we held $602.3 million of deposits from municipalities throughout Pennsylvania, New York, Ohio, and Indiana. These deposits may be more volatile than other deposits. If a significant amount of these deposits were withdrawn within a short period of time, it could have a negative impact on our short-term liquidity and have an adverse impact on our earnings.

Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.

We must maintain sufficient liquidity to respond to the needs of depositors and borrowers. As such, we utilize a diverse set of funding sources in addition to core deposits. As we continue to grow, we are likely to become more dependent on these sources, which may include FHLB advances, proceeds from the sale of loans, federal funds purchased and brokered certificates of deposit. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to maintain timely access to these additional funding sources. Our financial flexibility will be materially constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability would be adversely affected.

A protracted government shutdown may result in reduced loan originations and related gains on sale and could negatively affect our financial condition and results of operations.

During any protracted federal government shutdown, we may not be able to close certain loans and we may not be able to recognize non-interest income on the sale of loans. Some of the loans we originate are sold directly to government agencies, and some of these sales may be unable to be consummated during the shutdown. In addition, we believe that some borrowers may determine not to proceed with their home purchase and not close on their loans, which would result in a permanent loss of the related non-interest income. A federal government shutdown could also result in reduced income for government employees or employees of companies that engage in business with the federal government, which could result in greater loan delinquencies, increases in our nonperforming, criticized and classified assets and a decline in demand for our products and services.

Our inability to tailor our retail delivery model to respond to consumer preferences in banking may negatively affect earnings.

We have expanded our market presence through acquisitions and growth. Our branch network continues to be a very significant source of new business generation, however, consumers continue to migrate much of their routine banking to self-service channels. In recognition of this shift in consumer patterns, we regularly review our branch network, which has resulted in branch consolidation accompanied by the enhancement of our capabilities to serve its customers through alternate delivery channels. The benefits of this strategy will depend on our ability to realize expected expense reductions without experiencing significant customer attrition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 1C. CYBERSECURITY

Risk Management and Strategy

Our risk management program is designed to identify, assess, and mitigate risks across various aspects of our company, including credit, market, treasury, operational, compliance, model and data, and reputational. Cybersecurity is a critical component of this program, given the increasing reliance on technology and potential for a cybersecurity incident to occur, which could disrupt business operations or compromise sensitive data. Our Chief Information Security Officer (“CISO”) is primarily responsible for this cybersecurity component and is a key member of the organization, reporting directly to the Chief Information Officer and, as discussed below, periodically to the Innovation and Technology Committee of our board of directors. To date, the Company has not, to its knowledge, experienced an incident materially affecting or reasonably likely to materially affect the Company.

To prepare and respond to incidents, the Company has implemented a multi-layered cybersecurity program that is intended to comply with Gramm-Leach-Bliley Act (GLBA) 12 CFR 364, Appendix B, integrating people, technology, and processes. This includes employee training, the use of innovative technologies, and the implementation of policies and procedures in the areas of Information Security, Data Governance, Business Continuity and Disaster Recovery, Privacy, Third-Party Risk Management, and Incident Response. Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. The cybersecurity program is built upon a foundation of advanced security technology, our internal employee team, and operations based on industry best practices recommendations from the National Institute of Standards and Technology (NIST) Cybersecurity Framework, Federal Financial Institutions Examination Council (FFIEC) Guidelines, and Center for Internet Security (CIS) Benchmarks. This consists of controls designed to identify, protect, detect, respond and recover from information and cyber security incidents. Our Chief Information Security Officer and our Chief Information Officer, who reports directly to our Chief Executive Officer, along with key members of their teams, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices. The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions.

We also employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees, preparedness simulations and tabletop exercises, and recovery and resilience tests. We engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party specialists. We also actively monitor our email gateways for malicious phishing email campaigns and monitor remote connections as a significant portion of our workforce has the option to work remotely.

The Company relies on third-party vendor solutions to support its operations. Many of these vendors, especially in the financial services industry, have access to sensitive and proprietary information. To mitigate the operational, informational and other risks associated with the use of vendors, the Company maintains a Third-Party Risk Management Program, which is implemented through a Third-Party Risk Management Policy and includes a detailed onboarding process and periodic reviews of vendors with access to sensitive Company data. The Third-Party Risk Management Policy applies to any business arrangement between the Company and another individual or entity, by contract or otherwise, in compliance with the Interagency Guidance on Third-Party Relationships: Risk Management. The Third-Party Risk Management Program is audited periodically in accordance with our Board approved Internal Audit plan.

We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our information security and risk management programs. Regular internal monitoring is integral to the Company’s risk assessment process, which includes regular testing of internal key controls, systems, and procedures. In addition, independent third-party penetration testing of the effectiveness of security controls and preparedness measures is conducted at least annually or more often, if warranted by the risk assessment or other external factors. Management determines the scope and objectives of the penetration analysis.

We maintain both an Incident Response Plan and a Crisis Management Plan (the “Plans”) that provide a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, and to the Innovation and Technology Committee of our board of directors. The Plans are coordinated through the Business Resiliency Manager and Major Incident Manager, who

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ultimately report to the Chief Information Officer, and key members of management are embedded into the Plans by their design. The Plans facilitate coordination across multiple parts of our organization and are evaluated at least annually.

Integral elements of the Plans related to the Company’s response to security vulnerabilities include the following.

•Identifying the appropriate team and any appropriate sub-teams to address specific information and/or cyber security incidents, or categories of information and/or cyber security incidents.

•Coordinating Incident or Crisis Management activities, including developing, maintaining, and following appropriate procedures to respond to and document identified information and/or cyber security incidents.

•Conducting post-incident reviews to gather feedback on information and/or cyber security incident response procedures and address any identified gaps in security measures.

•Providing training and conducting periodic exercises to promote employee and stakeholder preparedness and awareness of the Plans.

•Reviewing the Plans at least annually, or whenever there is a material change in the Company’s business practices that may reasonably affect its cyber incident response procedures.

Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe. Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our company. For further discussion of risks from cybersecurity threats, see the section captioned “Risks Related to Operational Matters” in Item 1A. Risk Factors.

Governance

Our Chief Information Security Officer is accountable for managing our enterprise information security department and delivering our information security program. The responsibilities of this department include cybersecurity risk assessment, defense operations, cyber incident response, vulnerability assessment, threat intelligence, identity access governance, and the evaluation of third-party risk management and business resilience as it relates to the cybersecurity program.

The foregoing responsibilities are covered on a day-to-day basis by our Chief Information Security Officer and their team. The department consists of information security professionals with varying degrees of education and experience. Individuals within the department are generally subject to professional education and certification requirements. Our Chief Information Security Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management, including 20 years of cybersecurity experience, 12 of which was spent at the Company.

Our Operational Risk Management group provides guidance, oversight, monitoring and challenge of the first line’s activities. The second line of defense function is separated from the first line of defense function through organizational structure and ultimately reports directly to the Chief Risk Officer.

Our board of directors has established management committees including the Information Technology Steering Committee, which focuses on technology and business impact, and the Operational Risk Management Committee, which focuses on the identification, monitoring, assessment, and management of risk associated with our cyber and information security programs. These committees provide oversight and governance of the technology program and the information security program and are chaired by the Chief Information Officer and Chief Operational Risk Management Officer, respectively, and include the Chief Information Security Officer and other key departmental managers from throughout the entire company. The Information Technology Steering Committee meets monthly and the Operational Risk Management Committee meets at least quarterly to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks. More frequent meetings occur from time to time in accordance with the Incident Response Plan to facilitate timely informing and monitoring efforts. The Chief Information Security Officer reports summaries of key issues, including significant cybersecurity incidents, discussed at committee meetings and the actions taken to the Innovation and Technology Committee of our board of directors on a quarterly basis (or more frequently as may be required by the Incident Response Plan).

The Innovation and Technology Committee of our board of directors is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Chief Information Security Officer and our Chief Information Officer provide quarterly reports to the Innovation and Technology Committee of our board of directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Innovation and Technology Committee of our board of directors reviews and approves our information security and technology budgets and strategies annually. Additionally, the Risk Committee of our board of directors reviews key metrics summarizing our cyber security risk profile on a quarterly basis. The Innovation and Technology Committee and Risk Committee of our board of directors each provide a report of their activities to the full board of directors at each board meeting.

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Lastly, at least annually, the CISO reports directly to the Board the overall status of the Information Security Program and the Company’s compliance with the Interagency Guidelines for Safeguarding Customer Information. Any material findings related to the risk assessment, risk management and control decisions, service provider arrangements, results of testing, security breaches or violations are discussed as are management’s responses and any recommendations for program changes.

ITEM 2. PROPERTIES

As of December 31, 2023, we conducted our business through our main office located in Warren, Pennsylvania, 77 other full-service offices and six free-standing drive-through locations throughout our market area in central and western Pennsylvania, 27 full-service offices and one free-standing drive-through location in western New York, 10 full-service offices and one free-standing drive-through location in eastern Ohio, and 20 full-service office locations in Indiana. At December 31, 2023, our premises and equipment had an aggregate net book value of approximately $138.8 million.

ITEM 3.LEGAL PROCEEDINGS

Northwest Bancshares, Inc. and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on our financial condition and/or results of operations. See Note 19 in the notes to the Consolidated Financial Statements.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the NASDAQ Global Select Market under the symbol “NWBI”. As of February 20, 2024, we had 22 registered market makers, 9,433 stockholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms), and 127,112,705 shares outstanding.

Payment of dividends on our shares of common stock is subject to determination and declaration by the Board of Directors and will depend upon a number of factors, including capital requirements, regulatory limitations on the payment of dividends, our results of operations and financial condition, tax considerations and general economic conditions. No assurance can be given that dividends will continue to be declared or, if declared, what the amount of dividends will be. See “Item 1. Business Supervision and Regulation — Holding Company Regulation — Source of Strength/Capital Distributions” for additional information regarding our ability to pay dividends.

There were no sales of unregistered securities during the quarter ended December 31, 2023.

On December 13, 2012, the Board of Directors approved a program that authorizes the repurchase of approximately 5,000,000 shares of common stock. This program does not have expiration date. During the year ended December 31, 2023, we did not repurchase any shares and there are a maximum of 2,261,130 remaining shares that can be purchased under the current repurchase program.

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Stock Performance Graph

The following stock performance graph compares (a) the cumulative total return on our common stock between December 31, 2018 and December 31, 2023, (b) the cumulative total return on stocks included in the Total Return Index for the NASDAQ Stock Market (US) over such period, and (c) the cumulative total return on stocks included in the NASDAQ Bank Index over such period. Cumulative return assumes the reinvestment of dividends, and is expressed in dollars based on an assumed investment of $100.

There can be no assurance that our stock performance will continue in the future with the same or similar trend depicted in the graph. We will not make or endorse any predictions as to future stock performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

Among Northwest Bancshares, Inc., the NASDAQ Composite Index, and the NASDAQ Bank Index

At December 31,

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ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our principal business consists of collecting deposits and making loans primarily secured by various types of collateral, including real estate and other assets in the markets in which we are located. Attracting and maintaining deposits is affected by a number of factors, including interest rates paid on competing deposits and other investments offered by other financial and non-financial institutions, account maturities, fee structures, and levels of personal income and savings. Lending activities are affected by the demand for funds and thus are influenced by interest rates, the number and quality of alternative lenders and regional economic conditions. Sources of funds for lending activities include deposits, borrowings, repayments on loans, cash flows from investment and mortgage-backed securities and income provided from operations.

Our earnings depend primarily on net interest income, which is the difference between interest earned on our interest-earning assets, consisting primarily of loans and investment securities, and the interest paid on interest-bearing liabilities, consisting primarily of deposits, borrowed funds, and trust-preferred securities. Net interest income is a function of our interest rate spread, which is the difference between the average yield earned on our interest-earning assets and the average rate paid on our interest-bearing liabilities, as well as a function of the average balance of interest-earning assets compared to the average balance of interest-bearing liabilities. Also contributing to our earnings is noninterest income, which consists primarily of service charges and fees on loan and deposit products and services, fees related to investment management and trust services, net gains and losses on the sale of assets, including SBA loans, and mortgage banking income. Net interest income and noninterest income are offset by provisions for credit losses, general administrative and other expenses, including employee compensation and benefits, occupancy expense and processing costs, as well as by state and federal income tax expense.

Our net income was $135.0 million, or $1.06 per diluted share, for the year ended December 31, 2023 compared to $133.7 million, or $1.05 per diluted share, for the year ended December 31, 2022, and $154.3 million, or $1.21 per diluted share, for the year ended December 31, 2021. The provision for credit losses was $22.9 million for the year ended December 31, 2023 compared to $28.3 million for the year ended December 31, 2022, and a provision credit of $15.8 million for the year ended December 31, 2021.

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Selected Financial and Other Data

The summary financial information presented below is derived in part from the Company’s Consolidated Financial Statements. The following is only a summary and should be read in conjunction with the Consolidated Financial Statements and notes included elsewhere in this document. The information at December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 is derived in part from the audited Consolidated Financial Statements that appear in this document.

At December 31,

(In thousands)

Selected Consolidated Financial Data:

Mortgage-backed securities available-for-sale 861,291 993,571

Loans receivable, net of allowance for credit losses:

Residential mortgage loans held-for-sale 8,768 9,913

For the years ended December 31,

(In thousands except per share data)

Selected Consolidated Operating Data:

Earnings per share:

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At or for the year ended December 31,

Selected Financial Ratios and Other Data:

Tangible common equity to tangible assets (10) 8.30 % 8.03 % 8.43 %

Noninterest expense to average assets (5), (6), (8), (9) 2.46 % 2.32 % 2.44 %

Noninterest income to average assets (7) 0.80 % 0.78 % 1.00 %

Net interest income to noninterest expense (5), (6), (8), (9) 1.24x 1.28x 1.12x

Nonperforming loans to net loans receivable 0.86 % 0.76 % 1.60 %

Nonperforming assets to total assets 0.67 % 0.58 % 1.10 %

Allowance for credit losses to nonperforming loans 129.01 % 143.98 % 64.38 %

Allowance for credit losses to loans receivable 1.10 % 1.08 % 1.02 %

(1)Represents net income divided by average assets.

(2)Represents net income divided by average equity.

(3)Represents average yield on interest-earning assets less average cost of interest-bearing liabilities (shown on a fully taxable equivalent (“FTE”) basis).

(4)Represents net interest income as a percentage of average interest-earning assets (shown on a FTE basis).

(5)Provision for unfunded commitments was reclassified from other expenses for periods prior to December 31, 2023. Respective ratios were updated to reflect the reclassification.

(6) 2021 includes $3.5 million in merger, asset disposition and restructuring expense.

(7) 2021 includes $25.3 million gain on sale of insurance business.

(8) 2022 includes $5.6 million in merger, asset disposition and restructuring expense.

(9) 2023 includes $6.7 million in merger, asset disposition and restructuring expense.

(10) Excludes goodwill and other intangible assets (non-GAAP).

The following non-GAAP financial measures used by the Company provide information useful to investors in understanding our operating performance and trends, and facilitate comparisons with the performance of our peers. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company’s Consolidated Statements of Financial Condition.

Tangible common equity to assets

Tangible common equity to tangible assets 8.30 % 8.03 % 8.43 %

Critical Accounting Estimates

Our significant accounting policies are described in Note 1 of the notes to the Consolidated Financial Statements. Certain accounting policies are important to the understanding of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances, including, but without limitation, changes in interest rates, performance of the economy, financial condition of borrowers and laws and regulations. The following is the accounting estimate we believe is critical.

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Allowance for Credit Losses.We recognize that losses will be experienced on assets and that the risk of loss varies with the type of asset, the creditworthiness of a borrower, general economic conditions and the quality of the collateral, if any. We maintain an allowance for expected lifetime losses in the loan portfolio. The allowance for credit losses represents management’s estimate of lifetime expected losses based on all available information. The allowance for credit losses is based on management’s evaluation of relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. The loan portfolio is reviewed regularly by management in its determination of the allowance for credit losses. The methodology for assessing the appropriateness of the allowance includes a review of historical losses, peer group comparisons, industry data and economic conditions. As an integral part of their examination process, regulatory agencies periodically review our allowance for credit losses and may require us to make additional provisions for estimated losses based upon judgments different from those of management. In establishing the allowance for credit losses, a combination of statistical models are applied to various pools of outstanding loans. We use a 24 month forecasting period and revert to historical average loss rates thereafter. Credit relationships that have been classified as substandard or doubtful and are greater than or equal to $1.0 million are reviewed by the Credit Administration department to determine if they no longer continue to demonstrate similar risk characteristics to their loan pool. If a loan no longer demonstrates similar risk characteristics to their loan pool they are removed from the pool and an individual assessment is performed. The allowance calculation is also supplemented with qualitative reserves that take into consideration the current portfolio and specific risk characteristics, such as changes in underwriting standards, portfolio mix, delinquency level, or term, as well as changes in environmental conditions, among other factors, that have occurred but are not yet reflected in the quantitative model component.

Our allowance for credit losses is sensitive to a number of inputs, most notably the macroeconomic forecast assumptions as well as the reasonable and supportable forecasting periods that are incorporated in our estimate of credit losses. Therefore, as the macroeconomic environment and related forecasts change or decisions are made to shorten or lengthen the forecasting period, the allowance for credit losses may change materially. The following sensitivity analyses do not represent management’s expectations of the deterioration of our portfolios or the economic environment, but are provided as hypothetical scenarios to assess the sensitivity of the allowance for credit losses to changes in key inputs. We utilized a multi-scenario based macroeconomic forecast in determining the December 31, 2023 allowance for credit losses, which included a weighting of three scenarios: an upside scenario, a baseline scenario and a downside scenario. We placed the most weight on the baseline scenario, with the remaining weight split evenly between the upside and downside scenarios. If we placed 100% weighting on the baseline scenario, the quantitative allowance for credit losses would have been approximately $15.3 million lower. These forecasts revert to our long-term historical average loss rate after a 24 month forecasting period. If we shortened the forecasting period to twelve months and reverted to our long-term historical loss rate thereafter, the quantitative allowance for credit losses would have been approximately $5.2 million lower.

Although management believes that it uses the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for credit losses is adequate or that increases will not be necessary should the quality of assets deteriorate as a result of the factors discussed previously. Any material increase in the allowance for credit losses may adversely affect our financial condition and results of operations. The allowance is based on information known at the time of the review. Changes in factors underlying the assessment could have a material impact on the amount of the allowance that is necessary and the amount of provision to be charged against earnings. Such changes could impact future results. For further information related to our allowance for credit losses, see Note 1(f) of the notes to the Consolidated Financial Statements.

Recently Issued Accounting Standards

The following Accounting Standard Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) have not yet been adopted.

In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements.” This ASU includes amendments on several subtopics in the FASB Accounting Standards Codification (“Codification”) to incorporate certain disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K. The adoption of this ASU may lead to certain disclosure being relocated into the financial statements. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. These amendments are to be applied prospectively. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. We do not believe this guidance will have a material impact on the Company’s financial statements.

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In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures.” This ASU requires additional disaggregated disclosures on entity’s effective tax rate reconciliation and additional details on income taxes paid. This guidance is effective for annual periods beginning after December 15, 2025, with early adoption permitted. This ASU is applied prospectively with the option to apply the ASU retrospectively. We do not believe this guidance will have a material impact on the Company’s financial statements.

Balance Sheet Analysis

Assets. Total assets at December 31, 2023 were $14.419 billion, an increase of $305.8 million, or 2.2%, from $14.113 billion at December 31, 2022. This increase in assets was driven by an increase in total loans receivable. A discussion of significant changes follows.

Cash and cash equivalents. Cash and cash equivalents decreased by $17.1 million, or 12.3%, to $122.3 million at December 31, 2023, from $139.4 million at December 31, 2022. This decrease was primarily to fund organic loan growth, described in further detail below.

Marketable securities. Marketable securities decreased by $241.2 million, or 11.5%, to $1.858 billion at December 31, 2023, from $2.099 billion at December 31, 2022. Held-to-maturity securities decreased $66.4 million, and available-for-sale marketable securities decreased $174.7 million. These decreases were driven by the maturity and regular monthly cash flows, in addition to the sale of approximately $110.0 million of available-for-sale securities during the year in order to reallocate these funds into higher interest-earning products.

The following table sets forth certain information regarding the amortized cost and fair value of our available-for-sale marketable securities portfolio and mortgage-backed securities portfolio at the dates indicated.

At December 31,

Amortizedcost Fairvalue Amortizedcost Fairvalue

(In thousands)

Residential mortgage-backed securities available-for-sale:

Marketable securities available-for-sale:

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The following table sets forth certain information regarding the amortized cost and fair value of our held-to-maturity marketable securities portfolio and mortgage-backed securities portfolio at the dates indicated.

At December 31,

Amortizedcost Fairvalue Amortizedcost Fairvalue

(In thousands)

Residential mortgage-backed securities held-to-maturity:

Marketable securities held-to-maturity:

The following table sets forth information regarding the issuers and the carrying value of our mortgage-backed securities at the dates indicated.

At December 31,

(In thousands)

Residential mortgage-backed securities:

Other (including non-agency) 5 6

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Marketable Securities Portfolio Maturities and Yields. The following table sets forth the scheduled maturities, carrying values, amortized cost, market values and weighted average yields for our marketable securities and mortgage-backed securities portfolios at December 31, 2023. The annualized weighted average yields are calculated by taking the interest of the marketable securities divided by the amortized cost. Adjustable-rate mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust.

(Dollars in thousands)

Marketable securities available-for-sale:

Residential mortgage-backed securities available-for-sale:

Marketable securities held-to-maturity:

Residential mortgage-backed securities held-to-maturity:

Further information and analysis of our investment portfolio, including tables with information related to gross unrealized gains and losses on available-for sale and held-to-maturity marketable securities and tables showing the fair value and gross unrealized losses on marketable securities aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position are located in Note 4 of the Notes to the Consolidated Financial Statements.

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Loans Receivable. Gross loans receivable increased by $494.4 million, or 4.5%, to $11.415 billion at December 31, 2023, from $10.920 billion at December 31, 2022. This increase was due to organic loan growth. Our business banking portfolio increased by $677.2 million, or 17.1%, to $4.633 billion at December 31, 2023 from $3.956 billion at December 31, 2022, primarily as a result of the new commercial lending verticals that we initiated during the current year. Specifically, our commercial and industrial (C&I) loan portfolio increased by $526.8 million, or 46.5%. The increase in our total business banking was partially offset by a decrease in our personal banking loan portfolio by $182.9 million, or 2.6%, to $6.782 billion at December 31, 2023 from $6.965 billion at December 31, 2022. Cash flows from both our marketable securities portfolio and personal banking portfolio were redirected to partially fund business banking growth.

Set forth below are selected data related to the composition of our loan portfolio by type of loan as of the dates indicated.

At December 31,

Amount Percent Amount Percent

(Dollars in thousands)

Personal Banking:

Residential mortgage loans held-for-sale $ 8,768 0.1 % $ 9,913 0.1 %

Commercial Banking:

(1) Consists primarily of secured and unsecured personal loans.

The following table sets forth the maturity of our loan portfolio at December 31, 2023. Demand loans and loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. Adjustable and floating-rate loans are included in the period in which the contractual repayment is due or they contractually mature, if interest only, and fixed-rate loans are included in the period in which the contractual repayment is due.

Personal Banking:

Commercial Banking:

Net unearned income and unamortized premiums and discounts $ 68,340

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The following table sets forth at December 31, 2023, the dollar amount of all fixed-rate loans due one year or more after December 31, 2023.

Personal Banking:

Commercial Banking:

The following table sets forth at December 31, 2023, the dollar amount of all adjustable-rate loans due one year or more after December 31, 2023. Adjustable and floating-rate loans are included in the table based on the contractual due date of the loan.

Personal Banking:

Commercial Banking:

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The following table provides the various loan sectors in our commercial real estate portfolio at December 31, 2023:

Property type Percent of portfolio

5 or More Unit Dwelling 14.5 %

Nursing Home 12.8

Retail Building 12.0

Commercial Office Building - non-owner occupied 9.3

Manufacturing & Industrial Building 4.8

Multi-use building - commercial, retail and residential 4.4

Warehouse/Storage Building 3.9

Commercial office building - owner occupied 3.3

Multi-use building - office and warehouse 3.3

Single Family Dwelling 2.7

Other Medical Facility 2.5

Student Housing 2.2

Hotel/Motel 2.1

Agricultural Real Estate 2.1

All Other Types 13.2

The following table describes our commercial real estate portfolio by state at December 31, 2023:

State Percent of portfolio

Pennsylvania 30.9

Indiana 7.9

All other 8.8

Deposits. Total deposits increased by $515.4 million, or 4.5%, to $11.980 billion at December 31, 2023 from $11.465 billion at December 31, 2022. This increase was driven by a $1.551 billion, or 147.4%, increase in time deposits due to customer preferences for this fixed maturity product. Partially offsetting this increase were decreases in savings and money market deposits totaling $659.1 million, or 13.9%, as customers moved balances to higher yielding product alternatives. In addition, demand deposit accounts decreased by $376.1 million, or 6.6%, as we believe customers used funds during this period of higher inflationary costs.

During the year ended December 31, 2023, we purchased $483.9 million of brokered deposits, which made up 18.6% of our time deposits and 4.0% of our total deposit balance at year end. The balance carried an average all-in cost of 5.42% and an average original term of 11.8 months. These purchases were through a registered broker, as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources.

In addition, at year end we had $356.6 million of deposits through our participation in the Intrafi Network Deposits (formerly ICS) program. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple interest-bearing demand accounts at other member banks and Northwest receives an equal amount of deposits from other member banks. The balance carried an average cost of 3.43%.

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The following table sets forth the dollar amount of deposits in the various types of accounts we offered at the dates indicated.

At December 31,

Balance Percent (1) Rate (2) Balance Percent (1) Rate (2)

(Dollars in thousands)

Time deposits:

(1) Represents percentage of total deposits.

(2) Represents weighted average nominal rate at year end.

The following table sets forth the dollar amount of deposits in each state by branch location as of December 31, 2023.

State Balance Percent

(Dollars in thousands)

The following table indicates the amount of our certificates of deposits of $250,000 or more by time remaining until maturity at December 31, 2023.

Maturity period Certificates of deposit

(In thousands)

Over three months through six months 156,901

Over six months through twelve months 505,596

Over twelve months 6,790

At December 31, 2023 and 2022, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $1.835 billion and $4.031 billion, respectively. At those dates, we had no deposits that were uninsured for any other reason. The following table provides details regarding the Company’s uninsured deposits portfolio:

Balance Percent of total deposits Number of relationships

(1) Uninsured deposits presented may be different from actual amounts due to titling of accounts.

Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $19.0 million, or 0.16% of total deposits, as of December 31, 2023. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $105.8 million, or 0.88% of total deposits, as of December 31, 2023. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $300,000 as of December 31, 2023.

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Borrowings. Borrowings decreased by $281.9 million, or 35.5%, to $513.1 million at December 31, 2023 from $795.0 million at December 31, 2022. This decrease was a result of growth in lower cost deposits which enabled the paydown of FHLB advances during the year.

The following table sets forth information concerning our borrowings at the dates and for the periods indicated.

During the years ended December 31,

(Dollars in thousands)

FHLB borrowings:

Maximum outstanding at end of any month during year 787,300 551,300

Weighted average interest rate during year 5.37 % 4.27 %

Weighted average interest rate at end of year 5.70 % 4.54 %

Collateralized borrowings:

Maximum outstanding at end of any month during year 101,059 135,736

Weighted average interest rate during year 1.09 % 0.19 %

Weighted average interest rate at end of year 1.72 % 0.27 %

Collateral received:

Maximum outstanding at end of any month during year 62,300 42,824

Weighted average interest rate during year 5.28 % 2.62 %

Weighted average interest rate at end of year 5.26 % 4.17 %

Subordinated borrowings:

Maximum outstanding at end of any month during year 114,189 123,638

Weighted average interest rate during year 4.00 % 4.00 %

Weighted average interest rate at end of year 4.00 % 4.00 %

Total borrowings:

Maximum outstanding at end of any month during year 1,009,462 795,006

Weighted average interest rate during year 4.82 % 2.74 %

Weighted average interest rate at end of year 5.02 % 3.88 %

Shareholders’ equity. Total shareholders’ equity at December 31, 2023 was $1.551 billion, or $12.20 per share, an increase of $59.8 million, or 4.0%, from $1.491 billion, or $11.74 per share, at December 31, 2022. This increase was the result of net income of $135.0 million for the year ended December 31, 2023, as well as a decrease in accumulated other comprehensive loss of $21.7 million due primarily to a decrease in unrealized loss in the available-for-sale investment portfolio. These changes were partially offset by $101.7 million of cash dividend payments during the year ended December 31, 2023.

Comparison of Results of Operations for the Years Ended December 31, 2023 and 2022

General. Net income for the year ended December 31, 2023 was $135.0 million, or $1.06 per diluted share, an increase of $1.3 million, or 1.0%, from $133.7 million, or $1.05 per diluted share, for the year ended December 31, 2022. The increase in net income resulted from an increase in net interest income of $15.0 million, or 3.6%, a decrease in the provision for credit losses of $5.4 million, or 19.2%, and an increase in noninterest income of $3.0 million, or 2.7%, partially offset by an increase in noninterest expense of $22.0 million, or 6.7%. Net income for the year ended December 31, 2023 represents a return on average equity and

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average assets of 8.94% and 0.95%, respectively, compared to 8.80% and 0.94% for the year ended December 31, 2022. A discussion of significant changes follows.

Interest Income. Total interest income increased by $139.1 million, or 31.0%, to $587.9 million for the year ended December 31, 2023 from $448.8 million for the year ended December 31, 2022. This increase is the result of increases in both the average yield and the average balance of interest-earning assets, as well as the change in our interest-earning asset mix. The average yield earned on interest-earning assets increased to 4.40% for the year ended December 31, 2023 from 3.39% for the year ended December 31, 2022 due to the rising interest rate environment. Additionally, the average balance of interest-earning assets increased by $113.6 million, or 0.9%, to $13.367 billion for the year ended December 31, 2023 from $13.254 billion for the year ended December 31, 2022. The changes in interest-earning asset mix are described further below.

Interest income on loans receivable increased by $135.8 million, or 33.3%, to $543.7 million for the year ended December 31, 2023 from $407.8 million for the year ended December 31, 2022. This increase in interest income on loans receivable is due to increases in both the average yield and average balance of loans receivable. The average yield earned on loans receivable increased to 4.90% for the year ended December 31, 2023 from 3.95% for the year ended December 31, 2022 due to the increase in market interest rates. The average balance of loans receivable increased $781.2 million, or 7.6%, to $11.100 billion for the year ended December 31, 2023 from $10.319 billion for the year ended December 31, 2022 due to organic loan growth in our commercial, residential mortgage, and consumer loan portfolios.

Interest income on mortgage-backed securities increased by $2.1 million, or 6.8%, to $32.9 million for the year ended December 31, 2023 from $30.8 million for the year ended December 31, 2022. This increase is the result of an increase in the average yield on mortgage-backed securities to 1.80% for the year ended December 31, 2023 from 1.56% for the year ended December 31, 2022 due to the purchase of higher yielding mortgage-backed securities in the prior year. Partially offsetting this increase was a decrease in the average balance of mortgage-backed securities of $146.2 million, or 7.4%, to $1.822 billion for the year ended December 31, 2023 from $1.969 billion for the year ended December 31, 2022 due to the sale of available-for-sale securities during the year coupled with regularly scheduled payments and maturities, the cashflows of which were redirected to higher yielding loans.

Interest income on investment securities decreased by $229,000, or 3.9%, to $5.6 million for the year ended December 31, 2023 from $5.8 million for the year ended December 31, 2022. This decrease is the result of a decrease in the average balance of investment securities of $24.1 million, or 6.3%, to $357.4 million for the year ended December 31, 2023 from $381.5 million for the year ended December 31, 2022. Partially offsetting this decrease in average balance was an increase in the average yield on investment securities to 1.57% for the year ended December 31, 2023 from 1.53% for the year ended December 31, 2022.

Dividends on FHLB stock increased by $2.1 million, or 292.9%, to $2.9 million for the year ended December 31, 2023 from $730,000 for the year ended December 31, 2022. This increase is the result of increases in both the average balance and the average yield of FHLB stock. The average balance of FHLB stock increased $22.4 million, or 131.3%, to $39.5 million for the year ended December 31, 2023 from $17.1 million for the year ended December 31, 2022. Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB. Additionally, the average yield increased to 7.27% for the year ended December 31, 2023 from 4.27% for the year ended December 31, 2022 due to increases in market interest rates.

Interest income on interest-earning deposits decreased by $698,000, or 19.4%, to $2.9 million for the year ended December 31, 2023 from $3.6 million for the year ended December 31, 2022. This decrease is attributable to a decrease in the average balance of interest-earning deposits by $519.8 million, or 91.6%, to $47.8 million for the year ended December 31, 2023 from $567.6 million for the year ended December 31, 2022 as the Bank deployed funds into higher yielding loans. Partially offsetting this decrease in average balance was an increase in the average yield on interest-earning deposits to 6.07% for the year ended December 31, 2023 from 0.63% for the year ended December 31, 2022, due to the campaign by the Federal Reserve Board over the last year to raise targeted short-term interest rates to combat inflation.

Interest Expense. Interest expense increased by $124.1 million, or 441.4%, to $152.2 million for the year ended December 31, 2023 from $28.1 million for the year ended December 31, 2022 due to increases in both the average cost and average balance of interest-bearing liabilities, as well as the change in liability mix. The average cost of interest-bearing liabilities increased to 1.56% for the year ended December 31, 2023 from 0.30% for the year ended December 31, 2022 resulting primarily from the rising interest rate environment. In addition, customers shifted balances from savings and market deposit accounts into higher yielding time deposits.The average balance of interest-bearing liabilities increased $355.6 million, or 3.8%, to $9.736 billion for the year ended December 31, 2023 from $9.381 billion for the year ended December 31, 2022 driven by an increase in average borrowed funds of $479.6 million, or 226.2%. Wholesale borrowings were utilized to fund loan growth as well as replace the decrease in the average balance of interest-bearing deposits, which declined by $120.6 million, or 1.4%. Lastly, the average balance of noninterest-bearing demand deposits decreased by $285.6 million, or 9.3%, as we believe customers used funds during a period of higher inflationary costs and searched for higher yield alternatives.

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Net Interest Income. Net interest income increased by $15.0 million, or 3.6%, to $435.7 million for the year ended December 31, 2023 from $420.7 million for the year ended December 31, 2022. This increase was attributable to the factors discussed above. Our interest rate spread decreased to 2.83% for the year ended December 31, 2023 from 3.09% for the year ended December 31, 2022, and our net interest margin increased to 3.26% for the year ended December 31, 2023 from 3.17% for the year ended December 31, 2022 due to the change in market rates as well as the change in our interest-earning asset and funding mix.

Provision for Credit Losses. We analyze the allowance for credit losses as described in Note 1(f) of the Notes to the Consolidated Financial Statements. The provision for credit losses decreased by $5.4 million, or 19.2%, to 22.9 million for the year ended December 31, 2023 compared to $28.3 million for the year ended December 31, 2022. The current period provision for credit losses includes $18.7 million for credit losses - loans and $4.2 million for credit losses - unfunded commitments. The prior period provision for credit losses includes $17.9 million for credit losses - loans and $10.5 million for credit losses - unfunded commitments. The $804,000 increase in the provision for credit losses - loans was driven by continued growth within our loan portfolio, and the $6.2 million decrease in our provision for credit losses - unfunded commitments was driven by the timing of the origination of loans with current off-balance sheet exposure as our undrawn commitments increased more rapidly during the prior year.

Net charge-offs to average loans increased to 0.11% for the year ended December 31, 2023 from 0.02% for the year ended December 31, 2022 due to several large recoveries during 2022. Total substandard loans declined by $17.8 million, or 7.5%, to $218.5 million, or 1.91% of loans outstanding at December 31, 2023 from $236.2 million, or 2.16% of loans outstanding at December 31, 2022. This decrease was assisted by the note sale of approximately $8.0 million of nonperforming loans for a net gain of approximately $726,000. In addition, delinquencies remain well controlled.

In determining the amount of the current period provision, we considered current economic conditions, including unemployment levels, bankruptcy filings, and changes in collateral values, and assessed the impact of these factors on the quality of our loan portfolio and historical loss experience. We analyze the allowance for credit losses as described in the section entitled “Allowance for Credit Losses”. The provision that is recorded is sufficient, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at December 31, 2023.

Noninterest Income. Noninterest income increased by $3.0 million, or 2.7%, to $113.8 million for the year ended December 31, 2023 from $110.8 million for the year ended December 31, 2022. This increase was driven by increases in service charges and fees, gains on sales of SBA loans, income from bank owned life insurance, and net gains on sales of real estate owned. Service charges and fees increased $4.0 million, or 7.3%, to $59.2 million for the year ended December 31, 2023 from $55.2 million for the year ended December 31, 2022, driven by commercial loan fees and an increase in deposit related fees based on customer activity in the current year. We also recognized $1.8 million in gains on the sales of SBA loans during the current year due to this newly launched lending vertical. Income from bank owned life insurance increased $1.5 million, or 20.5%, to $8.6 million for the year ended December 31, 2023 from $7.1 million for the year ended December 31, 2022, resulting from death benefits received in the current year. Lastly, the net gain on sales of real estate owned increased $1.4 million, or 232.7%, to $2.0 million for the year ended December 31, 2023 from $603,000 for the year ended December 31, 2022 as a result of gains on foreclosed property sales in the current year. These increases were partially offset by decreases in other operating income and mortgage banking income. Other operating income decreased $3.5 million, or 23.1%, to $11.8 million for the year ended December 31, 2023 from $15.3 million for the year ended December 31, 2022 due to prior year gains on the sales of branch buildings associated with the branch consolidations announced during the prior year. Mortgage banking income decreased $2.4 million, or 50.0%, to $2.4 million for the year ended December 31, 2023 from $4.9 million for the year ended December 31, 2022 due primarily to the volatile interest rate environment causing unfavorable pricing in the secondary market, as well as a slowdown in mortgage loan activity due to higher market interest rates.

In addition, during the current year we sold the mortgage servicing rights on approximately $1.3 billion of one- to four family mortgage loans for an $8.3 million gain, while also selling $110.0 million of investment securities for an equivalent loss, resulting in no impact to capital. However, we were able to reallocate these funds from investments yielding approximately 2.0% into commercial loans yielding over 7.0%.

Noninterest Expense. Noninterest expense increased by $22.0 million, or 6.7%, to $351.6 million for the year ended December 31, 2023 from $329.5 million for the year ended December 31, 2022. This increase was due to increases in almost all expense categories due to both inflationary costs as well as the continued build out of talent and infrastructure necessary to propel the organization to a higher level of performance. In particular, compensation and employee benefits increased $7.3 million, or 3.9%, to $195.7 million for the year ended December 31, 2023 from $188.4 million for the year ended December 31, 2022, driven primarily by the buildout of the commercial business and related credit, risk management, and internal audit support functions over the past twelve months. Processing expenses increased $6.2 million, or 11.8%, to $58.7 million for the year ended December 31, 2023 from $52.5 million for the year ended December 31, 2022 due to the implementation of additional third-party software platforms. FDIC insurance premiums increased $4.5 million, or 94.0%, to $9.3 million for the year ended December 31, 2023 from $4.8 million for the year

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ended December 31, 2022 due to an increase in the deposit insurance assessment rate beginning in the first quarter of 2023. Professional services increased $3.1 million, or 21.2%, to $17.8 million for the year ended December 31, 2023 from $14.7 million for the year ended December 31, 2022 primarily due to the use of third-party consulting and staffing support. Merger, asset disposition and restructuring expense increased $1.1 million, or 20.2%, to $6.7 million for the year ended December 31, 2023 from $5.6 million for the year ended December 31, 2022 due to the severance and fixed asset charges related to the branch optimization and personnel reductions previously announced. Lastly, other expenses increased $1.1 million, or 21.7%, to $6.4 million for the year ended December 31, 2023 from $5.2 million for the year ended December 31, 2022 due to an increase in employee relocation and other expenses. Partially offsetting these increases was a $1.0 million, or 23.5%, decrease in amortization of intangible assets to $3.3 million for the year ended December 31, 2023 compared to $4.3 million for the year ended December 31, 2022 due to previously acquired intangible assets being fully amortized in the prior year.

Income Taxes. The provision for income taxes increased by $95,000, or 0.2%, to $40.1 million for the year ended December 31, 2023 from $40.0 million for the year ended December 31, 2022. This increase in income tax expense is primarily due to the $1.4 million, or 0.8%, increase in pretax income to $175.1 million for the year ended December 31, 2023 from $173.7 million for the year ended December 31, 2022. Our effective tax rate for the year ended December 31, 2023 was 22.9% compared to 23.0% for the year ended December 31, 2022.

Comparison of Results of Operations for the Years Ended December 31, 2022 and 2021

General. Net income for the year ended December 31, 2022 was $133.7 million, or $1.05 per diluted share, a decrease of $20.7 million, or 13.4%, from $154.3 million, or $1.21 per diluted share, for the year ended December 31, 2021. The decrease in net income resulted from an increase in the provision for credit losses of $44.1 million, or 279.3%, and a decrease in noninterest income of $32.0 million, or 22.4%. Partially offsetting these unfavorable variances was an increase in net interest income of $29.4 million, or 7.5%, a decrease in income tax expense of $6.8 million, or 14.5%, and a decrease in noninterest expense of $19.3 million, or 5.5%.

Net income for the year ended December 31, 2022 represents returns on average equity and average assets of 8.80% and 0.94%, respectively, compared to 9.91% and 1.08% for the year ended December 31, 2021. A discussion of significant changes follows.

Interest Income. Total interest income increased by $30.3 million, or 7.2%, to $448.8 million for the year ended December 31, 2022 from $418.5 million for the year ended December 31, 2021. This increase is the result of increases in the average yield on interest-earning assets as well as the average balance of interest-earning assets, and specifically the change in our interest-earning asset mix. The average yield earned on interest-earning assets increased to 3.39% for the year ended December 31, 2022 from 3.16% for the year ended December 31, 2021 due to the rising interest rate environment. The average balance of interest-earning assets increased by $17.6 million, or 0.1%, to $13.254 billion for the year ended December 31, 2022 from $13.236 billion for the year ended December 31, 2021.

Interest income on loans receivable increased by $17.5 million, or 4.5%, to $407.8 million for the year ended December 31, 2022 from $390.3 million for the year ended December 31, 2021. This increase in interest income on loans receivable is due to increases in the average yield on loans receivable as well as the average balance of loans receivable. The average yield earned on loans receivable increased to 3.95% for the year ended December 31, 2022 from 3.81% for the year ended December 31, 2021 primarily due to the increase in market interest rates. The average balance of loans receivable increased $79.3 million, or 0.8%, to $10.319 billion for the year ended December 31, 2022 from $10.240 billion for the year ended December 31, 2021 driven mainly by growth in our retail portfolio as commercial Paycheck Protection Program (“PPP”) loans continued to payoff.

Interest income on mortgage-backed securities increased by $9.3 million, or 43.5%, to $30.8 million for the year ended December 31, 2022 from $21.5 million for the year ended December 31, 2021. This increase is attributed to increases in both the average yield of mortgage-backed securities and the average balance. The average yield on mortgage-backed securities increased to 1.56% for the year ended December 31, 2022 from 1.26% for the year ended December 31, 2021 due to the purchase of fixed-rate mortgage-backed securities with yields higher than the existing portfolio. Additionally, the average balance of mortgage-backed securities increased by $264.5 million, or 15.5%, to $1.969 billion for the year ended December 31, 2022 from $1.704 billion for the year ended December 31, 2021. This increase was primarily a result of additional purchases as we deployed interest-earning deposits into higher yielding investments throughout 2022.

Interest income on investment securities increased by $736,000, or 14.4%, to $5.8 million for the year ended December 31, 2022 from $5.1 million for the year ended December 31, 2021. This increase is primarily the result of an increase in the average balance of investment securities of $30.7 million, or 8.8%, to $381.5 million for the year ended December 31, 2022 from $350.8 million for the year ended December 31, 2021. Additionally, the average yield on investment securities increased to 1.53% for the year ended December 31, 2022 from 1.45% for the year ended December 31, 2021.

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Dividends on FHLB stock increased by $323,000, or 79.4%, to $730,000 for the year ended December 31, 2022 from $407,000 for the year ended December 31, 2021. This increase is the result of an increase in the average yield on FHLB stock to 4.27% for the year ended December 31, 2022 from 2.01% for the year ended December 31, 2021 as the FHLB of Pittsburgh increased dividend rates on required stock holdings in relation to higher market interest rates. Partially offsetting this increase was a decrease in the average balance of FHLB stock of $3.2 million, or 15.6%, to $17.1 million for the year ended December 31, 2022 from $20.2 million for the year ended December 31, 2021. Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB.

Interest income on interest-earning deposits increased by $2.4 million, or 201.4%, to $3.6 million for the year ended December 31, 2022 from $1.2 million for the year ended December 31, 2021. This increase is attributable to an increase in the average yield on interest-earning deposits to 0.63% for the year ended December 31, 2022 from 0.13% for the year ended December 31, 2021, as a result of increases in the targeted federal funds rate by the Federal Reserve. This was partially offset by a decrease in the average balance of interest-earning deposits by $353.8 million, or 38.4%, to $567.6 million for the year ended December 31, 2022 from $921.4 million for the year ended December 31, 2021 as we deployed funds into higher yielding loans and investments.

Interest Expense. Interest expense increased by $871,000, or 3.2%, to $28.1 million for the year ended December 31, 2022 from $27.2 million for the year ended December 31, 2021 due to an increase in the average cost of interest-bearing liabilities to 0.30% for the year ended December 31, 2022 from 0.29% for the year ended December 31, 2021. This increase was due to increases in the interest rates paid on borrowed funds and junior subordinated debentures in response to increases in market interest rates. Partially offsetting these increases was a decrease in the average balance of interest-bearing liabilities of $120.5 million, or 1.3%, to $9.381 billion for the year ended December 31, 2022 from $9.501 billion for the year ended December 31, 2021. This decrease in average balance was driven by a decrease in average deposits by $191.7 million, or 2.1%, as customers utilized funds for higher inflationary purchases and searched for higher alternative yields.

Net Interest Income. Net interest income increased by $29.4 million, or 7.5%, to $420.7 million for the year ended December 31, 2022 from $391.3 million for the year ended December 31, 2021. This increase was attributable to the factors discussed above, specifically the increase in interest income which was partially offset by the increase in interest expense on borrowed funds. Our interest rate spread increased to 3.09% for the year ended December 31, 2022 from 2.88% for the year ended December 31, 2021, and our net interest margin increased to 3.17% for the year ended December 31, 2022 from 2.96% for the year ended December 31, 2021 due to the change in market rates as well as the change in our interest-earning asset mix.

Provision for Credit Losses. We analyze the allowance for credit losses as described in Note 1(f) of the Notes to the Consolidated Financial Statements. The provision for credit losses increased by $44.1 million, or 279.3%, to a total provision expense of $28.3 million for the year ended December 31, 2022 compared to a provision credit of $15.8 million for the year ended December 31, 2021. The provision for the year ended December 31, 2022 includes $17.9 million for credit losses - loans and $10.5 million for credit losses - unfunded commitments. The prior period provision for credit losses includes a credit of 11.9 million for credit losses - loans and a credit of $3.9 million for credit losses - unfunded commitments. The $29.7 million, or 250.3%, increase to provision for credit losses - loans was driven primarily by growth within our loan portfolio, and the $14.4 million, or 367.7%, increase to a provision for credit losses - unfunded commitments was driven primarily by the origination of loans with off-balance sheet exposure. Both increases were also impacted by a deterioration in the most recent economic forecasts reflected in our allowance for credit loss models, including a reduction in home and used vehicle values. The negative provision in the prior year was driven by the improvements in the economic forecasts compared to the uncertainty that existed in 2020 for industries impacted by COVID-19. Total classified loans decreased by $126.9 million, or 34.9%, to $236.2 million at December 31, 2022 from $363.2 million at December 31, 2021. In addition, net charge-offs to average loans decreased to 0.02% for the year ended December 31, 2022 from 0.20% for the year ended December 31, 2021.

In determining the amount of the current period provision, we considered current economic conditions, including unemployment levels, bankruptcy filings, and changes in collateral values, and assessed the impact of these factors on the quality of our loan portfolio and historical loss experience. We analyze the allowance for credit losses as described in the section entitled “Allowance for Credit Losses”. The provision that is recorded is sufficient, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at December 31, 2022.

Noninterest Income. Noninterest income decreased by $32.0 million, or 22.4%, to $110.8 million for the year ended December 31, 2022 from $142.9 million for the year ended December 31, 2021. This decrease was primarily driven by the sale of our insurance business on April 30, 2021, resulting in a $25.3 million pre-tax gain during the prior year. This insurance business sale in the prior year also resulted in a decrease in insurance commission income of $3.6 million from the year ended December 31, 2021. Also contributing to this decrease was a decrease in mortgage banking income of $11.0 million, or 69.4%, to $4.9 million for the year ended December 31, 2022 from $15.9 million for the year ended December 31, 2021, due primarily to the volatile interest rate

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environment causing unfavorable pricing in the secondary market, as well as a slowdown in mortgage loan activity in general. Partially offsetting these decreases were increases in service charges and fees, other operating income, and income from bank-owned life insurance. Service charges and fees increased $3.4 million, or 6.5%, to $55.2 million for the year ended December 31, 2022 from $51.8 million for the year ended December 31, 2021 due to increased customer activity in 2022 after COVID-19 restricted behavior in the prior year. Other operating income increased $3.3 million, or 28.0%, to $15.3 million for the year ended December 31, 2022 from $12.0 million for the year ended December 31, 2022, resulting from gains on the sale of branch buildings associated with the previously announced branch consolidations and improvements in other fee income. Lastly, income from bank-owned life insurance increased $1.1 million, or 17.8%, to $7.1 million for the year ended December 31, 2022 from $6.1 million for the year ended December 31, 2021 due to additional death benefits received during the current year.

Noninterest Expense. Noninterest expense decreased by $19.3 million, or 5.5%, to $329.5 million for the year ended December 31, 2022 from $348.8 million for the year ended December 31, 2021 due to decreases across the majority of expense categories. Other expenses decreased $7.0 million, or 57.3%, to $5.2 million for the year ended December 31, 2022 from $12.3 million for the year ended December 31, 2021 driven by an increase in the discount rate used to calculate our pension liability and related pension expense. Compensation and employee benefits decreased $5.5 million, or 2.9%, to $188.4 million for the year ended December 31, 2022 from $193.9 million for the year ended December 31, 2021, despite recognizing approximately $1.4 million of additional expense related to the acceleration of compensation and stock benefits upon the passing of our former Chief Executive Officer. This decrease in compensation and employee benefits, as well as a $1.5 million, or 4.7%, decrease in premises and occupancy costs, to $29.6 million for the year ended December 31, 2022 from $31.1 million for the year ended December 31, 2021, was driven primarily by the branch consolidations completed in April 2022. Processing expenses decreased $3.3 million, or 5.9%, to $52.5 million for the year ended December 31, 2022 from $55.8 million for the year ended December 31, 2021, due to the prior year investment in technology and infrastructure. Professional services decreased $2.9 million, or 16.6%, to $14.7 million for the year ended December 31, 2022 from $17.6 million for the year ended December 31, 2021 primarily due to the utilization of third-party experts to assist with our digital strategy rollout during the prior year. Lastly, amortization of intangible assets decreased $1.3 million, or 23.0%, to $4.3 million for the year ended December 31, 2022 compared to $5.6 million for the year ended December 31, 2021 due to previously acquired intangible assets being fully amortized. These decreases were partially offset by an increase of $2.2 million, or 62.7%, in merger, asset disposition and restructuring expense to $5.6 million for the year ended December 31, 2022 from $3.5 million for the year ended December 31, 2021 due to severance and fixed asset charges related to the branch and personnel optimization to be completed during the first quarter of 2023.

Income Taxes. The provision for income taxes decreased by $6.8 million, or 14.5%, to $40.0 million for the year ended December 31, 2022 from $46.8 million for the year ended December 31, 2021. This decrease in income tax expense is primarily due to the $27.4 million, or 13.6%, decrease in pretax income to $173.7 million for the year ended December 31, 2022 from $201.1 million for the year ended December 31, 2021. In addition, our effective tax rate for the year ended December 31, 2022 was 23.0% compared to 23.3% for the year ended December 31, 2021.

Asset Quality

We actively manage asset quality through our underwriting practices and collection procedures. Our underwriting practices are focused on balancing risk and return while our collection operations focus on diligently working with delinquent borrowers in an effort to minimize losses.

Collection procedures. Our collection procedures for personal loans generally provide that at 15 days delinquent, a notice of late charges is sent and personal contact efforts are attempted by telephone to strengthen the collection process and obtain reasons for the delinquency. Also, plans to establish a payment program are developed. Personal contact efforts are continued throughout the collection process, as necessary. Generally, if a loan becomes 30 days past due, a collection letter is sent and the loan becomes subject to possible legal action if suitable arrangements for payment have not been made. In addition, the borrower is given information which provides access to consumer counseling services to the extent required by the regulations of the Department of Housing and Urban Development and other applicable authorities. When a loan continues in a delinquent status for 60 days or more, and a payment schedule has not been developed or kept by the borrower, we may send the borrower a notice of intent to foreclose, providing for cure periods of at least 30 days. If not cured, foreclosure proceedings are initiated.

Nonperforming assets. Loans are reviewed on a regular basis and are placed on nonaccrual status when, in the opinion of management, the collection of all contractual principal and/or interest is doubtful. Loans are automatically placed on nonaccrual status when either principal or interest is 90 days or more past due. Interest accrued and unpaid at the time a loan is placed on a nonaccrual status is reversed and charged against interest income.

Real estate acquired as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until such time that it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at the lower of the related loan balance or its fair value as determined by an appraisal, less estimated costs of disposal. If the value of the property is less

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than the principal balance, less any related specific credit loss reserve allocations, the difference is charged against the allowance for credit losses. Any subsequent write-down of real estate owned or loss at the time of disposition is charged against earnings.

Nonaccrual, Past Due, Restructured Loans and Nonperforming Assets. The following table sets forth information with respect to nonperforming assets. Nonaccrual loans are those loans on which the accrual of interest has ceased. Generally, when a loan becomes 90 days past due, we fully reverse all accrued interest thereon and cease to accrue interest thereafter. Exceptions are made for loans that have contractually matured, are in the process of being modified to extend the maturity date and are otherwise current as to principal and interest, and well secured loans that are in process of collection. Loans may also be placed on nonaccrual before they reach 90 days past due if conditions exist that call into question our ability to collect all contractual principal and/or interest. Other nonperforming assets represent property acquired through foreclosure or repossession. Foreclosed property is carried at the lower of its fair value less estimated costs to sell or the principal balance of the related loan.

At December 31,

(Dollars in thousands)

Loans 90 days or more past due:

Commercial real estate loans - owner occupied 177 278

Total real estate owned (REO) $ 104 413

Total loans 90 days or more past due to net loans receivable 0.22 % 0.19 %

Total loans 90 days or more past due and REO to total assets 0.17 % 0.15 %

Nonperforming assets:

Nonaccrual loans - loans 90 days or more past due $ 21,894 19,861

Nonaccrual loans - loans less than 90 days past due 72,490 61,375

Loans 90 days or more past due still accruing 2,698 744

Classification of Assets. Our policies, consistent with regulatory guidelines, provide for the classification of loans, or other assets including other real estate owned, considered to be of lesser quality as “substandard,” “doubtful,” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the financial institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable”. Assets classified as “loss” are those considered “uncollectible” so that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets that do not expose the savings institution to risk sufficient to warrant classification in one of the aforementioned categories, but which possess some weaknesses, are required to be designated as “special mention”. At December 31, 2023, we had 113 loans, with an aggregate principal balance of $130.8 million, designated as “special mention”.

We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. Our largest classified assets generally are also our largest nonperforming assets.

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The following table sets forth the aggregate amount of our classified assets at the dates indicated.

At December 31,

(In thousands)

Doubtful assets — —

Loss assets — —

Allowance for Credit Losses. Our Board of Directors has adopted an “Allowance for Credit Losses” (“ACL”) policy designed to provide management with a systematic methodology for determining and documenting the allowance for credit losses each reporting period. This methodology was developed to provide a consistent process and review procedure to ensure that the allowance for credit losses is in conformity with GAAP, our policies and procedures and other supervisory and regulatory guidelines.

On an ongoing basis, the Credit Administration department, as well as loan officers, branch managers and department heads, review and monitor the loan portfolio for problem loans. This portfolio monitoring includes a review of the monthly delinquency reports as well as historical comparisons and trend analysis. Personal and small business commercial loans are classified primarily by delinquency status. In addition, a meeting is held every quarter with each region to monitor the performance and status of commercial loans on an internal watch list. On an on-going basis, the loan officer, in conjunction with a portfolio manager, grades or classifies problem commercial loans or potential problem commercial loans based upon their knowledge of the lending relationship and other information previously accumulated. This rating is also reviewed independently by our Loan Review department on a periodic basis. Our loan grading system for problem commercial loans is consistent with industry regulatory guidelines which classifies loans as “substandard”, “doubtful” or “loss”. Loans that do not expose us to risk sufficient to warrant classification in one of the previous categories, but which possess some weaknesses, are designated as “special mention”. A “substandard” loan is any loan that is 90 days or more contractually delinquent or is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as “doubtful” have all the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions or values, highly questionable and improbable. Loans classified as “loss” have all the weakness inherent in those classified as “doubtful” and are considered uncollectible.

Credit relationships that have been classified as substandard or doubtful and are greater than or equal to $1.0 million are reviewed by the Credit Administration department to determine if they no longer continue to demonstrate similar risk characteristics to their loan pool. If a loan no longer demonstrates similar risk characteristics to their loan pool they are removed from the pool and an individual assessment will be performed.

If it is determined that a loan needs to be individually assessed, the Credit Administration department determines the proper measure of fair value for each loan based on one of three methods: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent, less costs of sale or disposal. If the measurement of the fair value of the loan is more or less than the amortized cost basis of the loan, the Credit Administration department adjusts the specific allowance associated with that individual loan accordingly.

If a substandard or doubtful loan is not individually assessed, it is grouped with other loans that possess common characteristics for credit losses and analysis. For the purpose of calculating reserves, we have grouped our loans into seven segments: residential mortgage loans, home equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate loans - owner occupied and commercial loans. The allowance for credit losses is measured using a combination of statistical models and qualitative assessments. We use a 24 month forecasting period and revert to historical average loss rates thereafter. Reversion to average loss rates takes place over twelve months. Historical average loss rates are calculated using historical data beginning in October 2009 through the current period.